FTC Testifies on Efforts to Stop Mortgage Foreclosure Rescue Fraud

February 13, 2008

For Release

The Federal Trade Commission today told the U.S. Senate Special Committee on Aging that the Commission, partnering with other federal agencies and state and local governments, is working to prevent mortgage foreclosure “rescue” fraud through law enforcement and consumer outreach.

Noting an estimated 75 percent increase in foreclosure filings from 2006 to 2007, Peggy Twohig, Associate Director of the FTC’s Division of Financial Practices, told the committee about the Commission’s enforcement efforts and its work to educate consumers about scams in which borrowers typically pay thousands of dollars but end up losing their homes and the money.

Recent Enforcement Responses

The testimony described title transfer scams, where consumers transfer ownership of their house, based on misleading representations that they are refinancing, or that they will be able to re-purchase their home from the “rescue” company after a short time period. The testimony also described mortgage negotiation scams, where companies promise to negotiate with the loan servicer, but rarely stop the foreclosure.

According to the testimony, the FTC is working with federal, state, and local partners, and has a number of ongoing, nonpublic investigations of these scams. FTC staff are participating in task forces in seven geographic areas, sharing information about trends in consumer complaints and working to identify solutions, the testimony stated.

Consumer Education and Outreach

The testimony explained that the Commission works to empower consumers to avoid harm by educating them about their options when facing foreclosure and other credit problems. In the wake of reports of rising mortgage foreclosures, the agency published an alert with guidance on steps borrowers can take to avoid foreclosure, including a warning about scams. In public meetings in several cities, FTC staff have provided consumers with information and resources, including scam warnings and advice for contacting loan servicers to learn about available options. During these meetings, agency staff have received valuable information from consumers about the conduct of specific realtors, brokers, lenders, servicers, and foreclosure rescue operators.

The testimony noted that the Commission is planning a stepped-up consumer outreach initiative in cities hardest hit by mortgage foreclosures, including radio public service announcements and classified advertisements in free publications.

The Commission vote authorizing the presentation of the testimony and its inclusion in the formal record was 5-0.

Copies of the testimony are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.shtm. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.